DJ Blog

As everyone knows, nobody reads their user agreements when they sign up for apps or services. Even if they did, it wouldn’t matter, because most of them stipulate that they can change at any moment. That moment has come.

You might not be concerned, but I’d like to point out that there’s a reason you’re not. Namely, you haven’t actually seen what this enormous loss of privacy translates into yet.

You see, there’s also a built in lag where we’ve given up our data, and are happily using the corresponding services, but we haven’t yet seen evidence that our data was actually worth something. The lag represents the time it takes for the market in personal data to mature. It also represents the patience that Silicon Valley venture capitalists have or do not have between the time of user acquisition and profit. The less patience they have, the sooner they want to exploit the user data.

The latest news (hat tip Gary Marcus) gives us reason to think that V.C. patience is running dry, and the corresponding market in personal data is maturing. Turns out that EBay and PayPal recently changed their user agreements so that, if you’re a user of either of those services, you will receive marketing calls using any phone number you’ve provided them or that they have “have otherwise obtained.” There is no possibility to opt out, except perhaps to abandon the services. Oh, and they might also call you for surveys or debt collections. Oh, and they claim their intention is to “benefit our relationship.”

Presumably this means they might have bought your phone number from a data warehouse giant like Acxiom, if you didn’t feel like sharing it. Presumably this also means that they will use your shopping history to target the phone calls to be maximally “tailored” for you.

I’m mentally tacking this new fact on the same board as I already have the Verizon/AOL merger, which is all about AOL targeting people with ads based on Verizon’s GPS data, and the recent broohaha over RadioShack’s attempt to sell its user data at auction in order to pay off creditors. That didn’t go through, but it’s still a sign that the personal data market is ripening, and in particular that such datasets are becoming assets as important as land or warehouses.

Given how much venture capitalists like to brag about their return, I think we have reason to worry about the coming wave of “innovative” uses of our personal data. Telemarketing is the tip of the iceberg.

ContentIssues

One conundrum in economics is why fims exist. Why don't people with money just contract individually with anyone they want work from? The answer people like Ronald Coase and Oliver Williamson highlighted were the problem of transaction costs, in particular the problem of monitoring employees to ensure that they deliver on the work promises (ie. the need to manage employees). These monitoring and transaction costs meant we ended up with massive workplaces like Henry Ford's River Rouge plants and similar industrial firms across the country. Nasty as management could be, workers could collectively at such places organize unions to demand standards of treatment that improved their lives and the lives of workers across the country. Laws such as the minimum wage and workplace safety were passed as well oriented to raising work standards in the traditional workplace.

Enter new data tools and companies like Uber. When every action of a contractor can be monitored by computer, the need for traditional onsite management is eliminated so workers can be treated as "independent contractors" and thereby lose most protections traditional workers have. As Rebecca Smith at the National Employment Law Institute outlines in aFortune article, by calling workers at Uber "non-employees", workers lose out:

Non-employees are not entitled to minimum wage, overtime pay, compensation for workplace injuries, or protection against discrimination. They have no federally-protected right to join a union and collectively bargain with the companies for which they work. Few have job-based health care or pensions.

Second, many on-demand companies break down and outsource what once were jobs into tasks, and those tasks into micro-tasks that are paid at piece rates, sometimes in pennies, to their independent contractor workers.

A recent survey of on-demand workers found that half have college degrees. Indeed, one in six landed these gigs through advertisements at their universities. Half said that finding enough work to pay the bills was their biggest problem. To make ends meet, two out of five work for more than one on-demand company at once, and just like workers in previous generations, what they most want from work is paid leave, pensions and health care.

The CEOs and venture capital firms behind these companies may be getting rich and a few high-end workers may benefit from a bit more flexibility in their work setups, but the overwhelming number of workers in this new "gig" economy are left with few tools to work together to improve their working conditions.

ContentIssues

Erik Brynjolfsson and Andrew McAfee, faculty members at the MIT Sloan School of Management, have a fascinating interview in this months Harvard Business Review where they admit the upbeat message of their last book, The Second Machine Age, largely ignored the downside of stagnation of the incomes of working families. And they think that technology itself may be a prime driver of that stagnation and rising economic inequality.

What they highlight in the graph accompany their interview is that worker productivity and GDP has continued to soar over the last few decades but workers have not seen the fruits of their own growing productivity. What’s notable is how anomalous this “decoupling” of wage growth from productivity is compared to earlier decades in the postwar period. Their focus on rising inequality and stagnant incomes is hardly new, but their focus on why technology may be a key driver of the problem is newer. They argue globalization is only a part of the story, citing a study that competition from China explains only a quarter of the decline in manufacturing employment in the U.S. Instead they focus on how technology has automated lower-skill jobs and increased the rewards to the more educated professionals.

This is not an uncommon theme but the authors add the worry that digital markets, with their nearly costless production of additional digital goods, makes them prone to winner-take-all control by dominant players. What this means is that skilled professionals are not just winning out over working class stiffs, but the richest of the top 0.01% are winning out over the professional class as a whole. As Brynjolffson notes, "If the top 1% are stars of a sort, they look up to superstars who have seen even bigger increases...evidence suggests that the divergence in incomes continues to grow with a fractal-like quality, with each subset of superstars watching an even smaller group of uber-superstars pulling away."

They still hold out hope that new technologies will yield new productivity gains that will benefit the broader public: "recent technological breakthroughs haven’t had their full impact on productivity—yet,” argues Brynjolffson. But other economists are wondering if current technology is delivering anything but profits to the richest sectors, as Paul Krugman argued in “The Big Meh” this week. That an Apple digital watch is one of the most hyped technologies of the year may be symbolic of the fact that we are getting less of a technological revolution than avatars of progress are admitting. Argues Krugman: "the whole digital era, spanning more than four decades, is looking like a disappointment."

Krugman in arguing that technology has been largely a nonevent may be treating the role of technology too benignly, which is where Brynjolfsson and McAfee, for all their residual technological boosterism, may have more insight in seeing the tech as playing a more active role by inherently driving inequality. They focus on the winner-take-all market effects of new technology and that seems to be part of the problem. But as I argued in This Time is Different: How Big Data Has Left the Middle Class Behind, what distinguishes new technology is its focus less on automation, however important, than on expanding information controlled by corporate managers. Information does not in fact want to be free, since then it’s merely knowledge. Information almost by definition is a zero-sum game of advantage for those who have it versus those who don’t. Consumers and workers lose out as they increasingly bargain with companies that know more about what they want and the price they are willing to pay or the wage they are willing to settle for. The problem is not that consumers were hoping for flying cars and had to settle for a search engine. Instead, the problem is that Google’s search engine, like so much new information tech, is not in fact designed to benefit consumers but instead is designed to extract information to serve corporate marketing strategies.

Henry Ford was a Nazi sympathizer and a brutal employer but he and his engineers designed his cars to serve regular families. Today, the best minds of the world are overwhelmingly focused on producing digital services whose paying customer base are other businesses. The toxic financial engineering of capital markets that drove the financial crisis was just one example of this problem, but when technology is so overwhelmingly focused on the needs of the elite, it’s hardly a shock to find that the elite ends up being the main group financially benefiting from its deployment.

ContentIssues

The Wall Street Journal has a long profile on how Carnival Cruise lines use big data to maximize the revenue and profits extracted from each customer. It's a good example of how companies use data to find the maximum prices customers are likely to pay and push them towards those goods and services at that mximum price.

Carnival owns 100 ships and nine brands and can dynamically price cruises on each ship and figure out who to market those seats to in order to apply its big data analytics:

Every day at Carnival, a data science teams sets in motion several algorithms that crunch information about items such as passenger behavior, vacation trends and queries from travel agents and potential customers online and by phone, Mr. Leibowitz said. The analytics systems run for eight hours overnight, devising thousands of recommendations for ticket price tweaks to Carnival’s slate of scheduled cruises worldwide.

The company also use "psychographics" to figure out who they want on the ships in the first place, since there's "a difference between someone who will pay $12 for a pair of Carnival logo flip-flops and one who will shell out a few hundred dollars for a champagne catamaran side trip on the high-end Holland America line."

One way to understand why companies increasingly manage multiple brands is to better implement this kind of price optimization/discrimination since slotting people into particular brands de facto slots them into different prices often for goods or services that are similar except for the brand name. The WSJ cites to the example of Hilton recently purchasing two new hotel chains to "add rooms priced in the low-end and mid-tier rungs to its lineup."

ContentIssues

Consumer and financial protection laws are wonderful when passed, but the key is to get them enforced. Government agencies have limited budgets for enforcement and political pressure often prevents government agencies from targeting lawbreaking companies. The solution for many laws has been to give private actors the right under those consumer, environmental and labor laws to sue companies in civil court. Whether those private actors have suffered direct harm is less the point than to have them act as "private attorneys general" enforcing the law on behalf of the public.

But there has been a large effort by corporate litigators to get the courts to declare that such laws are invalid if a plaintiff can't prove direct economic harm. A current example is efforts to limit the ability of plaintiffs to sue under the Fair Credit Reporting Act (FCRA). In a case that the U.S. Supreme Court agreed to hear just today, the web company Spokeo published inaccurate information about Thomas Robins. Robins sued Spokeo under FCRA saying publishing such inaccurate information for its corporate clients had injured his employment prospects. The District Court ruled that Robins had failed to show specific economic harm -- hard to do in a world where you never know what information corporations are using for internal decision-making. However, on appeal the Ninth Circuit Court of Appeals declared that since Congress had specifically granted private actors the right to sue based on violations of the FCRA, no specific demonstration of harm was needed to go to court, as Robins was "among the injured" meant to be protected by the statute, so Robins therefore has the right to stop violations of the law, whatever specific economic harm may or may not have occurred.

The bottom line is that Ninth Circuit said corporations have to follow the law and consumers protected by FCRA have the ability to enforce the law in court, without corproate defendants throwing up additional procedural barriers.

Proving economic harm in areas like reputation and the spread of false information is always challenging, so the Ninth Circuit decision was an important victory for consumer rights in the online world.

Unsurprisingly, the corporate world immediately began seeking to overturn the decision by appealing to the Supreme Court. One notable example was erstwhile competitors Google, eBay, Facebook and Yahoo! finding common cause in a joint amicus brief to the Supreme Court asking them to take the case. (See here for their brief)

The companies complain that they process so much data about so many people that the decision opens them up to liability from too many people if they violate the law-- as if their control of so much personal data in the first place is not part of the problem. The brief is fascinating since it details the large number of lawsuits the companies are already facing that they hope a favorable Supreme Court decision could just make go away. Just a few cited include:

In In re Facebook Privacy Litigation, Facebook is facing statutory damages for transmitting user information in violation of the Wiretap Act

Despite the fact that Congress made it clear in these laws that private actors could enforce the law when those laws were violated, whether concrete economic harm was demonstrated or not, the companies are arguing that the Constitution under Artice III bars such lawsuits unless the plaintiff can demonstrate specific economic harm-- essentially gutting most private enforcement of statutes especially in the privacy arena. While violating privacy laws no doubt causes harm to consumers, the effect is often diffuse and hard to prove, but if the companies have their way, the laws will dead except in occasional actions by underfunded public agencies -- who corporate forces seek to further underfund during budgetary proceeedings in Congress.

This case is a quiet blockbuster. If conservative Justices on the Supreme Court overturn the Ninth Circuit, critical laws meant to protect user privacy as well as a range of other consumer and financial protection laws will in effect become nearly unenforceable.

Note: The initial post included Amazon in the group of amici, which has been corrected here

ContentIssues

The thing that people like Snowden are worried about with respect to mass surveillance has already happened. It’s being carried out by police departments, though, not the NSA, and its targets are black men, not the general population.

Take a look at this incredible Guardian article written by Rose Hackman. Her title is, Is the online surveillance of black teenagers the new stop-and-frisk? but honestly that’s a pretty tame comparison if you think about the kinds of permanent electronic information that the police are collecting about black boys in Harlem as young as 10 years old.

Some facts about the program:

28,000 residents are being surveilled

300 “crews,” a designation that rises to “gangs” when there are arrests,

Officers trawl Facebook, Instagram, Twitter, YouTube, and other social media for incriminating posts

They pose as young women to gain access to “private” accounts

Parents are not notified

People never get off these surveillance lists

In practice, half of court cases actually use social media data to put people away

NYPD cameras are located all over Harlem as well

We need to limit the kind of information police can collect, and put limits on how discriminatory their collection practices are. As the article points out, white fraternity brothers two blocks away at Columbia University are not on the lists, even though there was a big drug bust in 2010.

For anyone who wonders what a truly scary police surveillance state looks like, they need look no further than what’s already happening for certain Harlem residents.

ContentIssues

Payday loans and other abusive high-interest loans targeting the working poor are one of the scourges of our financial system. Last month, the Consumer Financial Protection Board proposed new rules for the industry to help families avoid what the Board calls “Payday Debt Traps.”

To understand why payday loans are so noxious, there are a number of great studies (see here, here and here for examples), but I highly recommend people read this in-depth profile of the payday industry in Kansas City written up in the city’s alternative paper. This post will summarize some of the story it tells, but it’s worth reading the whole thing (although it’s long and in two parts).

What the story highlights is the way the Internet metasized local payday industry players from shady storefront operators into respectable national financial players backed by mainstream financial firms and respectable investors. In many ways, it’s a story of how the vices of shady exploitation have used the sanitary interface of the Internet to mainstream loansharking among wealthy elites.

The technology of big data became a key to this transformation since it made it easy both to find new victims and largely hide the identities of the payday lenders. As Pitch describes the typical approach:

Say you need a quick loan. You type "fast loan online Kansas City" into Google and click on one of the sites that pops up. There's a good chance that the site is not an actual lender but instead is a middleman of sorts that processes your information, evaluates your credit in a matter of seconds, and creates a profile for you.

Such “lead generation” means there’s little accountability in the industry with so many layers between borrowers and lenders and borrowers often find their data has been resold multiple times as people get barraged by calls from offshore payday lending companies. As U.S. Senator Jeff Merkley argued in 2012,"These websites mask the true identity of the lender so it is harder to track down and prosecute deceptive lenders."

Two Churches at Each End of the Online Payday Loan Pipeline

The article starts with a story contrasting two Catholic parishes in Kansas City. At the wealthy Prairie Village Catholic church, wealthy investors in the local online payday lending industry suddenly start showing up throwing around money:

"It was most obvious at the school auctions," says one member of the Prairie Village Catholic church. "You'd see these cliques of people pulling up in limos, acting wild, dropping a lot of money on exotic two-week vacations and the other lavish items up for bidding...And you see it enough times and you start to go, 'Where is this money coming from?"

That the money was coming from exploiting the poor did not go unnoticed among other parishioners: “People on the finance committee and the school board were talking about the morality of taking that money. But in the end, I think they just looked the other way." The local pastor furiously fundraising argued that he wasn’t about to make a judgment about “what constitutes a legitimate interest rate versus what constitutes an exorbitant interest rate.”

Across town at a much poorer Catholic parish where many members had been victims of payday loans, Rev. Ernie Davis was scornful of just hedging. "There's no justification for it [payday lending] in the faith we share. Anything that oppresses the poor is condemned in both Jewish and Christian Scriptures.”

The Kansas City Elite Who Pioneered Online Payday Loan Exploitation

What makes payday loans so oppressive is that while they are advertised as a short-term emergency solution, every credible study has found that the high interest rates and fees end up trapping customers in cycles of new loans and escalating debt.

The Online Lenders Alliance is the Washington, D.C. lobbying outfit for the payday industry online and was founded by Mark Curry, a Kansas City native who founded a range of payday loan related businesses. His roster of members includes a disproportionate number of Kansas City locals who have often done business with each other in a byzantine web of interlocking relationships—many of which came to legal blows, whose legal filings created much of the window into the industry that Pitch details. Big financial LLCs and financial firms backed up these exploitive companies with large infusions of cash. Many investors came from local Kansas City families, thus the culture of folks getting rich in the industry around KC, with companies promising twenty-five percent per year returns on money invested.

One of the acknowledged pioneers of some of the sleaziest tactics of the industry is another KC native, Scott Tucker, who launched nearly 500 different Internet-based payday lending companies, creating “byzantine trails of front companies.” To escape state regulation and lawsuits, he also cut deals with Indian tribes to front his businesses, since only the federal government can sue tribal-based businesses. For a payment of 1 to 2 percent of revenues to the Modoc Tribe of Oklahoma, Tucker had virtual immunity from any state regulation for years.

Finally, Tucker was sued by the Federal Trade Commission in 2012 to stop some of his most abusive tactics, but kept his massive wealth and continued to be celebrated in local Kansas City write-ups for his side hobby as a race car driver, just as the local Home Design magazine did an interior design spread on his brother’s palatial home.

For Tucker’s and other companies’ customers, the story is very different. One former employee at a firm described how he regularly “saw a customer loan of $300 turn into a $900 debt in a very short period of time, due to interest, rollover and late fees." Another internal document revealed that :

The Company's average customer will borrow ~$1200 (~3 loans) and repay ~$2350 over a 4-year timeframe. Margins on loans to repeat customers average 150% higher than loans to new customers."

The most profitable customers were taking out a loan, falling deeper into debt, taking out new loans to service that debt, and falling deeper into poverty.

While the operations have a high-tech sheen, the dirty collection tactics are highlighted by this anecdote. A whole set of front businesses are located at 909 Baltimore street, but no one know it:

Not a lot of sunlight finds its way into 908 Baltimore. Workers are prohibited from speaking with the media. No sign hangs outside the building. "It's because the owners are afraid of shootings and retribution for their collection practices," says a former employee. "

An Achilles heel of the online payday lenders is that they usually use the national check cashing system to enforce payments by borrowers. To get a loan, a borrower usually gives the lender access to their bank account to initially drop funds in and then later takes out repayments, fees and interest payments.

In 2013, the Federal Deposit Insurance Corporation (FDIC) began auditing banks to see whether they were assisting payday loan companies in evading state lending laws or otherwise violating consumers’ rights. Backed by the U.S. Department of Justice issuing subpoenas to banks and processors, many banks stopped accepting lenders as customers. More recently, the Consumer Financial Protection Bureau (CFPB) has been bringing suit against companies and even freezing their assets.

The proposed CFPB regulations overall for the payday lending industry will help as well, but the targeting of bank intermediaries as a tool also raises the issue of the role and responsibility of online platforms providing the lead generation services that allow companies to find their victims in the first place. California actually took the lead this month in announcing an initiative to work with major search engines to stop taking advertisements from unlicensed companies the state has issued cease and desist orders against. As California Department of Business Oversight Commissioner Jan Lynn Owen argued in launching the new program:

“Unlicensed payday lenders who operate online rank as one of the most significant consumer protection threats the DBO fights…They prey on our most vulnerable consumers and break our laws designed to protect borrowers from paying excessive fees and getting trapped in a debt spiral. Curbing their search engine advertising through this protocol with Microsoft and Google will help us fight the problem.”

All of these are encouraging steps in stopping the problem. But the culture of financial exploitation of the poor has been flexible over the years as the range of subprime mortgages, payday lending and other financial weapons targeting low-income families have shown. Targeting the worst offenders who violate the law is only part of the problem. As long as companies have so much data about borrowers, their desperation and their likelihood to accept bad financial terms, we can expect the rising inequality described between the two Kansas City parishes in Pitch’s story to continue.

ContentIssues

With European Competition Commissioner Margrethe Vestagerformally accusing the company of violating antitrust law and announcnga separate investigation of Google’s potential abuses of control of Android and other mobile practices, there was a deluge of coverage across the media

Many highlighted the protracted proceedings that Google will face and the likely expansion of charges as the investigations continue:

Vivienne Walt at Fortune wrote Google’s legal woes in Europe might only just be beginning. The investigations are “serious indeed, and potentially extremely expensive.” Further, “Vestager’s announcement means that Google is now thrust headlong into a protracted legal wrangle in Brussels, which could well result in the company having to pay hefty fines.”

The Economist'sGoogle: the end of the beginning argued “The case could drag on—ultimately in court—for ages before Google is fined or forced to change its ways. With the Android investigation starting too, Google could be in the regulatory mire for years.”

ReutersTIMELINE-Next steps in EU's Google casenoted that “many observers question whether Vestager will be willing to accept any offer Google would make. If she does not, she can order it to change its methods and fine it up to 10 percent of its annual global sales of $66 billion.”

In USA TODAY'sGoogle faces trouble abroad, Boston University law professor Keith Hylton said the “European process is not one in which American tech companies have prevailed."

Others hailed the action as critical in taking on the rise of globally dominant companies like Google:

James Ball at The Guardian argued in Let’s challenge Google while we still can, “Very few government bodies in the world [have] the scale to truly hold the largest internet giants to account – perhaps only the US and the EU...We are entering an era of near-stateless global giants, several of which will gain the power to act as a monopoly.”

Others emphasized the impact on the US and spurring possible action by regulators here:

Free State Foundation in Is the FCC Chairman Considering Going After Google?) said "inside sources say Federal Communications Commission Chairman Tom Wheeler is considering whether the FCC also should act to curb alleged abuses of the search giant’s market power here at home..FCC insiders say that Wheeler is concerned not only about the impact of Google’s actions on Google’s struggling existing competitors, but also about the adverse impact on the ‘next Google,’ the one still in the garage.”

Eric Clemons, a Wharton School professor, argued in the Huffington Post's The EU Files Complaints Against Google, and It's About Time!: “Google has committed so many abuses, over so many years, that it has hard to know where the European Commission should start...Eventually even Google's cozy ties with the current administration in Washington will not be enough to protect it, and there will be litigation in the US as well.”

Some of the usual suspects tried to downplay the probe, either accusing Europe of protectionism or arguing the situation was fundamentally different here in the United States:

The Wall Street Journal reported that as “Google Inc.prepares to fight charges that it has violated Europe’s competition rules, lawyers here are already limbering up for the next battle: big data.” In the piece, Maurits Dolmans, an antitrust lawyer with Cleary Gottlieb Steen & Hamilton LLP in Brussels argued: “Big data are ubiquitous, widely available and of fleeting value.” Further, according to Dolmans: “Search engines such as Bing and DuckDuckGo ‘are well beyond the size where scale-effects matter.’”

Overall, the EU action has done the major service of legitimizing all complaints about Google's monopolisitc actions and it does seem inevitable that the debate will increase in the United States itself, where the criticism of Google has been so much more muted than in Europe.z

ContentIssues

The announcement today that the European Competition Commissioner has launched an official antitrust action against Google promises to be just the first step in a likely escalation of actions against Google and other big data platforms increasingly dominating the online -- and increasingly offline -- economic landscape.

The initial probe by the European Commission is centered on how Google systemtically uses its search engine dominance to favor its own e-commerce services at the expense of rivals. As the Commission notes in its initial filings, Google first online shopping services failed miserably until it began favoring its own shopping services in its search engine results, so its "conduct may therefore artificially divert traffic from rival comparison shopping services and hinder their ability to compete, to the detriment of consumers, as well as stifling innovation." In the European legal process, this initial "Statement of Objections" will give Google ten weeks to respond before a more formal decision on whether Google violated the law will be made.

In this, Europe would be addressing the core issue of search engine manipulation that the United States Federal Trade Commission said was not an antitrust problem in its 2013 decision, but then Europe will have the advantage of actually addressing the evidence from the FTC's own staff report thatthe FTC itself buried.

More importantly, this looks to be just an initial step for the European Commission. At the same time, the EU has opened a separate formal investigation into how Google uses its dominance of the Android mobile operating system to force handset manufacturers to install its apps and otherwise "abused a possible dominant position in the field of operating systems, applications and services for smart mobile devices."

This resurrects an issue that four years ago briefly dominated debate on Google's abusive practices, after a private lawsuit's discovery revealed internal Google memos highligting a systematic campaign by the company to use Android to coerce manufacturers into using its services, in that case its geolocation services. As I wrote at the time in "Window into Google's Monopoly Maneuvers", the memos revealed "Google executives' views on how they sought to reinforce Google's monopoly and collect personal information from its users." Google literatlly forced manufacturers such as Motorola and Samsung to suspend shipping devices until they removed a rival geolocations service by its Skyhook competitor in the name of remaining "compatible" with Android standards. As Google's Dan Morrill had sad in an email, pretending the issue was one of “compatibility” with the Android system was the reason for excluding Skyhook was hardly a persuasive argument to allied manufacturers.

“it’s not like it isn’t obvious to the OEMs [manufacturers of the smartphones] that we are using compatitibility as a club to make them to things we want.” (p. 116)

Using compatitibilty as "a club" will no doubt be a red flag for antitrust regulators in Europe-- even if our own regulators have given Google a pass at every turn.

Of course Google wanted its search apps and other services installed on Android devices, no doubt a focus for the European Commission, but the key is why this was so important. It's not just to generate initial additional search and advertising revenue on mobile devices, but also that each of those apps collect crucial additional data on each user, which strengthens the ability of Google or any other data platform to more effectively make money off of each user-- "monetize the relationship" in Silicon Valley parlance.

And this is where the European Commission may be taking the first steps towards even bolder action in the online world.

Just last week, EU Competition Commissioner Margrethe Vestager said that in addition to the current antitrust probe, the EU will be exploring how companies' control of personal data gives them unfair power in the marketplace. In a speech, she argued

Some companies, while apparently not generating euros or cents, still make money because holding very large volumes of data generates value...Many people still don’t realize that sites that appear to be free are actually paid for by the information you provide through your searches and behavior online.

The EU has never looked at control of personal data as an antitrust issue, so this represents a critical shift by the Commission. As regulators begin focusing on this issue, one we've arged at Data Justice is critical for understanding growing exploitation and economic inequality in the new information-driven economy, Google and other big data platforms are only going to come under increasing political fire.

The action today is ultimately going to be less about one company than Europe signalling that a totally new approach to promoting competition and equity in data-driven markets is needed. In a speech this week, the EU's Data Minister Günther Oettinger argued for just this kind of new approach to regulation by European regulators, one that replaced "locked environments and platforms" with platforms that “must be more open and interoperable.”

Part of this is fear by Europe that US companies will dominate the future, but this fear should be one joined by a range of industries and individuals in the US as well that a handful of companies end up dominating the whole economy at the expense of all consumers.

ContentIssues

I’ve been looking into who uses credit scores – FICO scores or other alternative scores – and I’ve found that the insurance industry is a major user.

Homeowners insurance rates, for example, varies wildly by state depending on what kind of credit score you have, often more than doubling for people with poor credit versus people with excellent credit. This is in spite of the fact that homeowners insurance applies not to the payments of mortgages but rather to the contents of an apartment or home.

Statistics like this make me wonder, how much of this price discrimination comes from the insurance companies trying to understand and account for actual risk, and how much comes from their understanding that poorer people have fewer options and will simply pay predatory rates?

And just in case you’re a believer in free markets and fair competition, and think such predatory behavior would be whisked away in a competitive market, insurance companies actually target people who don’t shop around and charge them more. In other words, it’s not a free market if not everyone actually has good information.